September 21, 2020, ainerd
Commercial Real Estate Industry Will Never Be The Same.
The simple question is this: Will commercial real estate survive the pandemic? In the short term, unlikely. There is going to be a massive downturn and the future state though will not look the same as it was way back in 2019.
As the coronavirus pandemic forces companies to use e-commerce and domestically made products to accelerate supply chain efficiency, demand for industrial real estate is rising. Leasing activities in retail in the metro Atlanta is slowing to a minimum, following a national trend, with retail and hospitality sectors the hardest hit. Social distancing and falling revenues and redundancies are already wreaking havoc, and not just in retail.
While some sectors are more affected than others, the commercial real estate sector on Long Island shares the same fate as the region that continues to bear the brunt of the financial crisis in the US and its aftermath in Europe.
The long-term effects of the coronavirus pandemic are unknown, but it is very difficult to fully raise arms in the commercial real estate sector. While some are trying to squeeze into distressed assets or work remotely, it is very possible that the commercial real estate market will never look like it does today. The continued closure of many of Dallas’s most important commercial properties will undo years of efforts to strengthen the health and vitality of the nation’s central core. We hope for a well-educated approach to the future of the Dallas commercial real estate market, and while it may be a rocky road, I hope for the best.
We already know that shopping malls are struggling to survive the pandemic, and they are struggling long before the novel coronavirus. Many retailers are stepping up their business in an effort to “survive the pandemic,” and Lord writes that this could change the way stores look and work. This may change the look and workings of some shops, but not all.
Meanwhile, commercial real estate companies are trying to navigate the new COVID 19 landscape, focusing on remote control and connectivity to new technologies such as digital and advanced analytics. Such strategies can help improve tenants “experience and operations, even though relatively few real estate companies actively develop and track them during the pandemic, said David Schoenfeld, senior vice president and chief technology officer of the Real Estate Institute of America. Buying new clauses relating to “pandemics” is tricky because investors and lenders must agree to the contracts of the landlord and the new tenant, he says. Pandemic clauses are like coronaviruses, “said David D. Smith, chief executive of the National Association of Realtors’ Real Estate Advisors.
The industrial real estate sector developed strongly during the pandemic and will continue to do so, he said. Eudy agrees that he expects further turbulence in the commercial real estate sector. In the past, problems in the residential property markets preceded difficulties in the commercial markets, such as the financial crisis of 2008 and the recession of 2008, EUDy said, and he agrees. Still, he notes that any change in housing markets will ultimately depend on changes in pandemics, just as it does today.
Commercial property is a slow-moving market because tenants typically have long leases, Brown said. Commercial property is often discussed in the context of the housing market, but can be just as lucrative as long as tenants are in a building. Banks, for example, do not lend to dentists because they are reluctant to lend to individuals who buy commercial property for investment purposes, he said.
Although it is still open whether the commercial real estate market will return to COVID-19 completely, it remains to be seen. Brown of Hawaii Commercial Real Estate said the effects are being seen in commercial leases that can last several years. The standard assumption is that office and commercial real estate will decline as more workers work from home. Before I offer my assessment of the commercial real estate market, I would like to say that Colorado’s economy is far from fully reopened.
While the scale of the human catastrophe or pandemic is yet to be determined, the long-term impact of COVID-19 on the commercial real estate market is uncertain.
We will continue to monitor trends and see how the coronavirus affects all sectors of commercial real estate. Stay with LoopNet for more information on how to respond to the changing real estate landscape and be sure to stay one step ahead in your business. The chart below gives a look at how the trends in the US commercial real estate market have developed in recent years after the pandemic. You can also find the pandemic coverage by following our latest updates and learning more about how we affect the commercial market and its impact on the global economy.
The biggest unknown is how long the severe constraints on economic activity caused by the pandemic will last. CBRE officials predict that the reopening of retail stores will take several years and that several safeguards have not yet been defined, while we will not see restrictions lifted until sometime in 2021.